As unemployment climbs and businesses continue to make tough adjustments around ever-changing circumstances, some industries have proven to be more sustainable than others. One of the industries that has managed to continue with growth plans through the COVID-19 pandemic is the cannabis industry.
What Is the Impact of Coronavirus on the Cannabis Industry?
Cannabis was recently declared an “essential business” in many states, including Colorado, while coronavirus-related shelter-in-place orders and mandatory business shutdowns were imposed in states around the country. This meant that cannabis dispensaries were allowed to remain operational during the pandemic and could continue to fulfill cannabis orders from customers who were stuck at home and looking for some relief by buying weed. As a result, marijuana sales surged. For instance, Curaleaf reported seeing a 20% increase in their cannabis sales in March, even as most other U.S. businesses struggled. This was a trend that could be spotted across the cannabis industry, with increased cannabis sales being the rule rather than the exception for many marijuana retail operators.
“All in, we continue to believe cannabis is well-positioned versus other industries to outperform on a relative basis during unknowns on the coronavirus impact.”Aaron Grey, Alliance Global Partners analyst
Although the cannabis industry’s most celebrated holiday, 4/20, was a bit of a “mixed bag” for some marijuana businesses, the majority of cannabis operators were happy to see their sales remain relatively consistent in the days and weeks leading up to 4/20. The Green Solution CEO Steve Lopez echoed this enthusiasm: “We have seen steady business over the past few weeks as we’ve settled into new protocols.” While the coronavirus pandemic is having an adverse effect on most industries, such as oil and gas, the health sector, and retail businesses, the cannabis industry has remained stable and investor returns have been consistent.
Predicting What Happens Next: Will Cannabis Continue to Surge in 2020 and Beyond?
If anyone were looking to make a prediction about how the cannabis industry will continue to weather COVID-19, it would probably be instructive to look to how the alcohol industry fared during the country’s last recession. In 2008, while many U.S. businesses were struggling to stay afloat, wholesale alcohol sales remained steady and even showed eventual growth as the country emerged from the recession. Remarkably, in the first full year of the recession – when the unemployment rate was at 5.8% – alcoholic beverage sales expanded by more than 9%.
The fact that alcohol sales previously surged at the same time as a recession suggests that certain businesses and products might actually thrive during tough economic times. Could the same be true of marijuana? The recent success seen by cannabis businesses during the COVID-19 pandemic would seem to indicate that marijuana, like alcohol, is impervious to a larger economic decline. In fact, the cannabis industry may even be viewed as recession-proof. COVID-19 and related shutdown measures in several states did not disrupt any aspect of this essential industry: cannabis cultivation, processing, distribution, and retail all remained intact and largely unaffected by the virus. Moreover, consumer demand for marijuana increased dramatically as people adjusted to a new way of life brought on by coronavirus.
Investing in Cannabis During COVID-19
One of the best ways to invest in the cannabis industry right now is to invest directly in cannabis real estate opportunities. When pot was recently declared an “essential service” during the coronavirus pandemic, cannabis operators saw a huge surge in sales. And what was the one thing that those cannabis operators had in common? Real estate. Businesses that legally sell marijuana need real estate on which to operate, and that presents a strong investment opportunity for anyone who is looking to invest in the cannabis industry.
Scythian Real Estate is a full-service real estate company that specializes in working with sophisticated, well-capitalized cannabis operators in Colorado, North Dakota, and throughout the United States. As the cannabis sector continues to prove that it can withstand uncertain economic times, Scythian Real Estate is generating significant interest from accredited investors looking for cannabis investing options.
“We have a strong pipeline of new acquisitions as cannabis companies continue to implement growth plans for 2020. We are looking forward to new partnerships and bringing on new investors as people look for fixed income through real-estate-backed opportunities outside of the stock market or other more traditional sectors getting impacted by the current pandemic. We feel strongly that the cannabis industry will remain steady through these uncertain times.”Ryan Arnold, Scythian Real Estate partner
Contact Scythian Cannabis Real Estate
PLEASE NOTE THAT THIS BLOG IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY SECURITIES IN SCYTHIAN REAL ESTATE FUND.